Gold Prices Retreat as Markets Look Past 50 Bps Fed Rate Cut

Gold prices remained stable with slight declines during Asian trading on Thursday, recovering from losses incurred overnight. This came after the Federal Reserve’s less dovish stance tempered hopes for a significant rate cut.

The strength of the U.S. dollar put additional pressure on gold, as expectations grew that interest rates in the U.S. may not decrease as much as previously anticipated in the medium to long term. Additionally, traders took profits following a surge in gold prices leading up to the Fed’s decision.

As of early trading, gold was up 0.1% at $2,561.30 per ounce, while December futures dropped 0.5% to $2,585.65 per ounce. Spot prices were also experiencing declines, retreating further from recent record highs.

### Fed Lowers Rates, but Outlook Remains Cautious

The Federal Reserve lowered rates by 50 basis points, aligning with market expectations, marking the first cut since the onset of the COVID-19 pandemic in 2020. The central bank indicated the start of a easing cycle.

Fed Chair Jerome Powell addressed concerns surrounding a potential economic slowdown, indicating that risks associated with rising inflation and a softer labor market were balanced. While Powell suggested the possibility of further rate cuts, with the market anticipating a total reduction of 125 basis points by year-end, he also emphasized that the Fed would not revert to the ultra-low rates seen during the pandemic. He noted that the Fed’s neutral rate would be significantly higher moving forward, which dampened some of the optimism surrounding the rate cut.

Nevertheless, the expectation of lower rates is generally favorable for non-yielding assets like gold, as it reduces the opportunity cost of investing in bullion.

Other precious metals saw slight increases on Thursday but were also recovering from earlier losses. Platinum rose 0.5% to $978.15 per ounce, while palladium increased by 0.2% to $30.755 per ounce.

### Copper Prices Increase Amid Anticipation of Chinese Rate Decision

In the industrial metals sector, copper prices rose on Thursday, driven by expectations of additional stimulus measures from China, the largest consumer of copper. An important interest rate decision from the Chinese government is expected on Friday.

On the London Metal Exchange, benchmark copper gained 0.4% to $9,425.50 per ton, while one-month copper futures advanced 0.6% to $4.2970 per pound.

The People’s Bank of China is largely expected to maintain its current benchmark rate during its upcoming meeting. However, ongoing signs of economic weakness in the country may lead to further reductions in the Loan Prime Rate in the future.